2017 (5) TMI 761 - AT - Service Tax

Penalty - failure to discharge tax liability in time - works contract service - Held that - there is no dispute as to the fact that the appellant has discharged the entire service tax liability with interest, prior to the issuance of the SCN, which calls for non-issuance of the SCNe by the department as per the provisions of Section 73(3) of FA, 1994 - penalties set aside - appeal allowed - decided in favor of assessee.

Summary

Issues:

1. Liability of penalty for not discharging tax liability in time.

Analysis:

The appeal was directed against an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mumbai - II. The main issue in this case was whether the appellant should be held liable for penalty due to non-discharge of tax liability in a timely manner. The appellant contended that they were under a bona fide belief that tax liability did not arise on them during the period in dispute (April 2006 to March 2008). However, upon being informed, they discharged the entire service tax liability and interest before the issuance of the show cause notice. The appellant relied on judicial decisions to support their argument, including the cases of Commissioner of Central Excise & Service Tax (LTU), Bangalore v. Adecco Flexitone Workforce Solutions Ltd and Commissioner of Central Excise, Nagpur - II v. Galaxy Construction Pvt Ltd.

Upon considering the contentions raised by the appellant's counsel, the Tribunal found merit in the argument that the tax liability should have been discharged under the category of 'Works Contract Service' instead of 'Commercial or Industrial Construction Service'. The Tribunal noted that the appellant had indeed discharged the entire service tax liability with interest before the show cause notice was issued. Referring to the decision of the apex Court in Larsen & Toubro Ltd, the Tribunal emphasized that works contract remains a works contract both before and after a specific date. Citing the provisions of Section 73(3) of the Finance Act, 1994, the Tribunal concluded that the non-issuance of the show cause notice by the department was warranted in this case.

Based on the facts, circumstances, and judicial precedents, the Tribunal held that the penalties imposed on the appellant were unsustainable and set them aside. The appeal was allowed to the extent of contesting the imposition of penalties, and the impugned order was set aside accordingly.